The Government is poised to award a major construction contract to a company jointly controlled by BAM, the main contractor for the National Children’s Hospital, despite not meeting value-for-money tests.
Ministers will on Wednesday consider a proposal to proceed with the tender for Invesis, formerly known as BAM PPP, a vehicle for building public-private partnerships (PPPs) controlled by the Dutch construction giant along with a pension fund.
[ BAM begins High Court proceedings against board of national children’s hospitalOpens in new window ]
The project will see new buildings constructed at the Atlantic Technological University in Galway and Letterkenny, the South-East Technological University at Carlow and Waterford, and the Technological University of the Shannon.
A final cost/benefit analysis conducted by the State found that economic benefits “clearly outweigh” the economic costs, but Ministers will also be told that the tender price exceeded the upper end of a public sector benchmark used in a value-for-money comparison test.
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Prof Eoin Reeves of the University of Limerick’s department of economics, who has researched PPPs, said that guidelines governing these deals require a project to pass the value-for-money test.
“This is to ensure that the PPP costs less than using traditional procurement. The public sector benchmark is an estimate of the project cost using traditional procurement,” he said.
If the cost of using a public-private partnership exceeds the benchmark, “one would not expect the project to proceed as a PPP”, he said.
Guidelines for PPPs allow State bodies to award contracts to bids if they comply with the public sector benchmark – but if they exceed this, they must be approved by the Government. It is understood that the Government’s view is that the building projects will help economic growth at a regional level, and that the State will get approximately €1.60 back for every €1 it spends on the project.
The tender received approval at Cabinet in July, but Minister for Higher Education Patrick O’Donovan sought a further cost/benefit analysis before proceeding
It is understood that the State’s analysis is that works planned under the contract would be delayed if it did not proceed or if it moved to retender for the project. The Department of Public Expenditure is understood to be supportive of awarding the tender. The guidelines outline that the final decision on a project should not be based on the value-for-money test alone.
A spokesman for BAM declined to comment.
The State has been criticised for years for its spending and time overruns on the National Children’s Hospital, where BAM is the main contractor.
[ Lucy Nugent has been appointed new chief executive of Children’s Health IrelandOpens in new window ]
It has also become embroiled in a series of legal disputes with BAM, which most recently lodged proceedings in the High Court against the board overseeing development of the hospital after a dispute over millions of euro in additional fees.
A bitter war of words broke out between Minister for Health Stephen Donnelly and the company before the general election, which also saw the Opposition target the Government over the cost of the €2.2 billion hospital.
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